Token ratio

Understanding the Token ratio is straightforward yet crucial. Watt Protocol employs the Token ratio to determine how many liquid-staked Watt tokens you receive when wrapping, and how many original tokens you reclaim upon unwrapping.

The Token ratio is calculated by dividing the amount of original tokens stored securely in the vault (tokens are deposited into the vault upon wrapping) by the total supply of minted Watt tokens.

With each protocol transaction, a portion of the collected fees is dedicated to burning Watt tokens. Burning reduces the total token supply, which in turn increases the Token ratio. Consequently, unwrapping tokens at a higher Token ratio yields a greater amount of original tokens, effectively distributing accrued yield to liquid-staked Watt token holders. Thus, each protocol transaction contributes positively to the yield of liquid-staked Watt tokens.

The exact APR is always displayed within the application interface.

The Burn rate parameter controls the proportion of fees specifically allocated for burning liquid-staked Watt tokens.